India Payroll: FAQs

Employees' Provident Fund (EPF) is a mandatory retirement savings contribution: 12% from the employee and 12% from the employer, calculated on basic salary plus dearness allowance. The employer's 12% splits into 8.33% EPS (pension scheme) and 3.67% EPF, plus a 0.5% EDLI contribution and a 0.5% administrative charge (EPFO).

Employees' State Insurance (ESI) is a mandatory health and social security contribution for employees earning up to ₹21,000/month (₹25,000 for persons with disabilities). Total contribution is 4% of gross wages: 3.25% employer, 0.75% employee, reduced from 6.5% total in July 2019 (Press Information Bureau, Government of India).

CTC (Cost to Company) is the total annual cost to the employer - including basic salary, allowances, and employer statutory contributions like EPF and gratuity accrual. Because employer contributions never reach the employee as cash, in-hand (take-home) salary is reliably lower than CTC, commonly 65-80% of the CTC figure, with the gap widening at higher income levels as tax becomes a bigger deduction.

It covers EPF, ESI, professional tax (a small state-level tax, varies by state), TDS (income tax withheld at source, tied to employee investment declarations), gratuity accrual, and adherence to state-level Shops and Establishments Acts. This is the core value an EOR or a properly staffed India entity provides for US companies.

Notice periods commonly run 30-90 days for India tech roles, with senior positions frequently on the longer end. This directly affects hiring timelines - a candidate serving notice cannot start immediately, so factor it into workforce planning alongside sourcing and interview time.